China, Brazil among those racing to attract qualified E&P talent
Around the world, in traditional high-production areas, as well as frontier regions, the competition for qualified talent is driving up compensation demands, with companies seeking to attract as many top candidates as possible from a shrinking pool.
As each country does what it can to make use of its natural resources and fulfill its energy potential, demand for oil and gas professionals of all disciplines is at an all-time high. Energy companies are doing what they can to ease the global skills gap, which means there has never been a better time to work in the oil and gas industry. Excellent opportunities are on offer for those willing to relocate and, as companies are re-training and up-skilling new employees, there are immense prospects for people working in other industries, who are keen to transfer their skills to the energy sector.
In the Asia-Pacific region, the industry is facing unprecedented growth. The region is looking to migration to fill the skills gap, which is similar to the state of affairs in the UK North Sea. One indicator of the huge expansion in the region is the Australian Workforce and Productivity Agency’s (AWPA) predication, that the number of jobs in the oil and gas sector is likely to jump by nearly two-thirds, from just under 39,000 workers in 2013, to 61,212 in 2018.
Australia, with its booming LNG market, is competing for labor with a flourishing mining industry, which has also seen significant growth over the past five years. Today, Australia has two operating LNG processing plants—the North West Shelf Venture in Western Australia and the Darwin LNG facility in the Northern Territory—but another eight are under construction, which will have a significant impact on the existing skills shortage.
In Asia, the industry is unique, with work differing from that typically done in Western countries. Rising operating costs and the involvement in larger, more sophisticated and costly projects makes recruitment one of the biggest challenges to businesses in the region.
Major companies throughout Asia have found it challenging to attract qualified candidates to locations that are less developed, and have, therefore, set up bases and offices of excellence in Singapore and Malaysia. These bases serve as international hubs for expat workers, creating an ecosystem where businesses battle for talent within the expat community, as companies are constantly vying to surpass the salary and benefits of competitors to attract the best candidates.
The demand is driven by Singapore’s status as the regional and global hub for design and construction of offshore rigs, FPSOs, FSOs and topside structures. International companies are keen to secure a slice of this business, which increases demand for estimators and proposals engineers with strong backgrounds in FPSO and topside projects. Recruitment of regional sales managers and business development managers is necessary to achieve growth targets, capitalizing on the strong development of offshore oil and gas fields in Malaysia, Vietnam, Indonesia and China.
The coming months will see an increase in the number of companies, which focused previously on the downstream sector, venturing into the upstream territory. This trend is beginning to gain popularity and is creating a pull factor to senior executives, who are working already in upstream companies, to take up challenges in the new start-up services. Current upstream activities also spur on new construction for onshore refineries, tank terminals and jetties. Most projects in the region are happening in Malaysia and Myanmar, and are about to start, or are already in the middle of the construction phase, so talent from around the region is very much in demand, especially candidates with project and construction management experience on their CVs.
The major ambition for China, moving forward, is to increase production of natural gas, with the country’s government looking to double its consumption of gas by 2015, pushing the use of non-fossil fuels to 15% of its total energy use by 2020. If achieved, China would match the U.S. as the top natural gas consumer globally by 2035, and ease its dependence on imported oil. In time, this will lead to the construction of onshore and offshore LNG facilities, which means the demand for construction and project managers, and those with project management skills, will rise.
Due to the string of recent deepwater discoveries in Bohai Bay and the South China Sea, which had traditionally been closed off to Western service companies, Chinese service firms look to the support of outsiders to help build their capabilities and expertise to run these activities. In August 2013, CNOOC reported seven new discoveries and 18 appraisal wells offshore China.
As a result, there has been an increase in the demand for migrant workers, who want to relocate to China, to work for Chinese state-owned oil companies. As part of these roles, candidates receive full expatriate packages, including housing and transportation allowances, and education for children. This has been a popular trend this past decade, and we expect it will continue to the foreseeable future.
These discoveries also bring the opportunity for Western subsea contractors to expand operations through new set-ups, JVs or production-sharing contracts in the Chinese territory. Most recently, we have sourced personnel for appraisal well drilling programs, which have been carried out in Bohai Bay. The agreements also have opened up new opportunities for senior engineers, who are usually required to lead a team of junior or inexperienced Chinese engineers.
THE NORTH SEA
A major trend in the UK and Norwegian markets is the number of clients looking for retained recruitment services for challenging hires, mainly those with 20-plus years of oil and gas experience. Candidates of this caliber are largely headhunted from competitors and, much like other regions, as the talent pool decreases, higher salaries are on offer.
In Norway, continued growth in the oil and gas sector, combined with already-low national unemployment rates, means the country, and its Scandinavian neighbors, must seek more highly skilled workers from beyond its borders. This requires inflated salaries to attract the high caliber of talent required, particularly when high tax rates are considered. Additionally, the United Nations Regional Information Centre (UNRIC) reported that Norway’s unemployment rate is 2.8%, which is significantly lower than the EU average of 11.8%.
In terms of opportunities and quality of life, Stavanger is seen as an ideal location for expats, as the standard of living is extremely high, which, along with a straightforward visa process and a generous annual holiday allowance, is a major pull for expats. This has resulted in talent relocating to Norway rather than the UK. Skilled, experienced workers moving to Norway will find it easy to secure employment. While many Norwegians speak English in the workplace, candidates having some knowledge of the Norwegian language will improve their prospects greatly.
The UK remains a major hub for recruitment activity, as it continues to be the largest producer of both oil and gas within the EU, 98% of which is offshore (Fig. 1), according to the Department of Energy and Climate Change. Just under half (44%) of those employed by the UK oil and gas industry are based in Scotland, which faces a critical skills shortage, so companies are looking outside the UK for new hires.
Oil and gas salaries in the UK have outpaced wage inflation for a prolonged period of time, and this trend is set to continue. Last year, the average oil and gas wage rose by 15%, and the average salary surpassed $116,000, which has tightened the global competition for staff.
Immigration restrictions have been limiting for an industry which is truly international, while also making it increasingly challenging to place talented engineers from outside the EU within the UK. However, the recent change by the UK government to immigration restrictions, which saw 20 engineering vocational categories added to an exemption list, has eased this issue slightly, allowing businesses to attract highly skilled workers from outside the EU. The exemption list also allows companies to place employees from international bases on secondments, to gain experience in the North Sea.
Generally speaking, if a candidate has an industry-related degree from a European university, this will stand him or her in good stead for the future, as many European qualifications are globally recognized.
Saudi Arabia remains the world's largest supplier of crude oil and related liquids, and, as other countries come to the forefront of E&P activity, we will continue to witness a rapid growth in the Middle East. Recently, clients have been bidding for projects in Iraq, largely to further develop oil fields that were already producing, or to return to fields that were already explored, but not fully developed or commercially productive.
The country has large proven oil reserves, the majority in southern Iraq, but, due to infrastructure constraints and political disputes, actual rates have fallen short of production targets. However, post-war and post-sanctions, this will change in the coming years, as the Iraqi government develops infrastructure and production techniques. If oil fields are developed as initially planned, it would increase total Iraqi production capacity to almost 12 MMbopd by 2017 and, to reach these ambitious targets, a skilled and experienced workforce is required.
Opportunities in the Middle East are outweighed by the capabilities of a limited workforce, as there is a shortage of workers willing to move to this region. Those who are willing to relocate have high expectations for expatriate packages, and often ask recruiters to negotiate the types of terms which had become the norm prior to the 2008 financial crisis. However, current opportunities do not meet these expectations, particularly with accommodation, schooling and home travel expenses. Hence, it is increasingly difficult to attract professionals over age 30, who have a number of years’ experience in the industry and, generally speaking, have school-aged children. Clients are struggling to find managerial-level personnel to fill roles as geologists, reservoir engineers and drilling engineers.
Middle Eastern governments aim to hire local people, but, as many are inexperienced in key roles, there is a need for experienced managers to lead challenging projects. Even when extremely high salaries are up for negotiation, there is still a stigma associated with certain locations, including Iraq and Iran. UN sanctions prompted many oil companies to withdraw from Iran, due to reduced access to the products needed for the oil and energy sectors, causing a decline in oil production. However, as these sanctions are lifted, oil and gas companies are expected to return in the immediate future, and there will be huge opportunities for generous day rates within the next couple of years.
Experienced Europeans are also in demand in Libya, as the country looks to make up one-quarter of the oil and gas workforce with Europeans, to exploit the country’s abundant natural resources. As salaries are so high, clients operating in European and Middle Eastern regions are being forced to employ contractors rather than staff, which is always a preference. We predict that this trend will continue.
The oil and gas industry is growing at a rapid rate in the Americas and, as major companies focus future investments in Norway and North America, rather than in UK waters (due to rising E&P costs), this will continue. Reports suggest that the U.S. is set to overtake Russia as the world's largest producer of oil and natural gas, combined; with this, comes an upsurge in demand for managers in all engineering disciplines, risk and asset integrity.
Similar to other global energy hubs, the U.S. faces a skills gap in the coming years, which is forecast to worsen, as many experienced workers are approaching retirement age, leaving gaps in expertise and knowledge. This will make things difficult for companies operating in the U.S. and South America.
In late 2013, the U.S. Energy Information Administration (EIA) stated that, from the start of 2007 through to the end of 2012, total U.S. private sector employment increased by more than one million jobs, or about 1%. Over the same period, the oil and gas industry increased by more than 162,000 jobs, a 40% increase, which has caused an upsurge in recruitment activity from clients.
Around half of workers in the sector perform supporting activities for oil and gas operations, including exploration, excavation, well surveying, casing work and well construction. The demand for on-site workers is high, particularly on rigs in the Bakken and Eagle Ford formations. Much of the work in the U.S. is project-based, therefore being able to place temporary and contract workers is increasingly important to clients operating in the country.
Placements in Colorado are on the rise, as oil and gas production in the state is in line with global performance trends. Considering that the industry generates $29.6 billion in the state, the number of people employed in the oil and gas sector is set to increase from its relatively small rate (4.7%), as reported by the Colorado Oil and Gas association (COGA).
The industry faces competitive challenges in the energy market and, according to Headwaters Economics, the strength of crude oil prices, relative to natural gas prices, has driven a dramatic shift in drilling activity from gas to oil across the region, and within Colorado. This makes the recovery of a significant share of Colorado’s pre‐recession gas development activity somewhat remarkable. Although the workforce in Colorado is smaller than that of other states (Texas, California, Oklahoma and Louisiana), it was the only employment sector to grow during the recession, by 40%. Drilling activity in the region is high, and much of our recruitment activity, around 75%, is to place candidates for drilling-associated roles.
Since the discovery of the Eagle Ford shale in 2008, Texas has outdone the U.S. economy in terms of job creation and low unemployment rates. Nearly half of all new jobs created in the U.S. are based in Texas, which is due largely to the state’s oil and gas industry. Positions in demand cover all engineering disciplines, attracting both local and global talent. Next door, Louisiana is also drawing professionals to its industry, the state’s biggest employer, led by offshore production activity. Generally, those moving to the U.S. can gain employment quickly, provided they have enough industry experience.
Canada is the sixth-largest crude oil producer globally, according to the Canadian Association of Petroleum Producers (CAPP), and currently supports 550,000 jobs across the country. We largely recruit for hires in Alberta, Nova Scotia and Newfoundland. The Canadian government is looking to entice expats, particularly from the UK, drawing them in with higher pay and lower taxes, with a particularly keen goal of recruiting female engineers.
In South America, Brazil's booming oil industry continues to gain attention, and EIA reports show that there is an estimated 14 billion bbl of proven reserves off the coasts of Rio de Janeiro and Espírito Santo. Pre-salt discoveries can potentially make Brazil the sixth-largest oil producer in the world by 2035 and, as a number of billion-dollar investments have been made in the region, Brazil is, and will continue to be, a key area for job seekers. Due to the extensive need for manpower to fulfill these projects, Brazilian companies are looking increasingly to recruitment agencies, to build on the oil and gas workforce. Geologists, geophysicists and petrophysicists are also in high demand, as companies operating in Brazil focus on E&P projects.
As demand outpaces talent in the country, many companies are looking elsewhere to attract engineers, including an increased drive to recruit graduates, or, more significantly, the use of contract, temporary or project-based workers. However, this tactic is not without complications, as companies based in North America are being governed more strictly on correctly classifying these types of employees. The importance of this is at an all-time high, in light of changing governmental regulations, like the Patient Protection and Affordable Care Act (PPACA), and the IRS’ claim that it will be more vigilant against companies that do not meet contract employee classification requirements.
Misclassifying W-2 employees as 1099 independent contractors may result in unwanted IRS audits that can leave employers responsible for the tax liabilities and penalties. It also can leave employers responsible for paying back taxes and penalties associated with the PPACA, if they are found to have misclassified employees. Assuming the compliance risk associated with temporary, temp-to-hire and interim employees, companies can ease concerns and uncertainty around classification status by asking recruitment specialists to directly employ contract workers, assuming all risk for tax liability, insurance (health and liability) and benefits.
Globally, and mirroring previous reports, the one common issue faced in each region is the challenge to attract the talent required to fulfill potential. For countries to reach a self-sufficient energy state, companies must look to develop strategies that nurture and foster employee skills for the future.